Externalities, Public Goods, and Common Resources – Navigating the market equilibrium
Consider our new understanding of what makes water quality a "wicked problem" using the example of the Mississippi River Watershed. In particular, focus on the SDGs related to clean water & sanitation and sustainable cities & communities. We completed this application following the BASICS module Town Hall and stakeholder-mapping activities. In this exercise, students design a policy for government intervention in various markets related to using water in a community. Subsequently, students predict and explain how stakeholders may change their behavior in response to the policy: firms, households, schools, etc.
Students critically assess concepts of supply and demand, welfare analysis (i.e., consumer and producer surplus, deadweight loss), externalities, and government policy intervention.
Context for Use
Principles of Microeconomics course - predominantly first and second-year students with limited economics background
Used most effectively in an Honors-designated version of the course for high-achieving students. The course enrollment is capped below 20 students to allow for enhanced discussion and engagement in the classroom.
This portion of the exercise took one class period, following the Town Hall exercise and stakeholder mapping activities (one-week total for these preliminary exercises).
Skills the students should have already acquired in preparation for this exercise: supply and demand, the effect on market equilibrium of government policy interventions
Description and Teaching Materials
In addition to the slides included with the general BASICS module, these lectures introduce the material specific to our economics-focused application. These are all reviewed prior to the full launch of the module. The course-specific exercise comes at the end.
- Supply, Demand, and Government Policies (PowerPoint 2007 (.pptx) 126kB Apr13 22): the effect of price controls (ceilings and floors), taxes, and subsidies on the market price and quantity
- Consumers, Producers, and the Efficiency of Markets (PowerPoint 2007 (.pptx) 10.1MB Apr13 22): welfare analysis, consumer surplus, producer surplus, deadweight loss
- Externalities (PowerPoint 2007 (.pptx) 96kB Apr13 22): positive and negative externalities, deadweight loss, how to use government policies to internalize the externality
- Public Goods and Common Resources (PowerPoint 2007 (.pptx) 284kB Apr13 22): characteristics of different types of goods, market failure, deadweight loss, how to use government policies to correct market failure
- Externalities, Public Goods, and Common Resources – Navigating the market equilibrium (Microsoft Word 2007 (.docx) 720kB Apr13 22): Course-specific exercise
Teaching Notes and Tips
Students worked on the application in groups during the class period. After approximately 30 minutes in breakouts, one student from each group presented their analysis by drawing graphs on the board.
Each group submitted hard copies of their in-class work for participation credit. I also use informal benchmark check-ins at the beginning and end of each class.